The 20th century saw two great economic revolutions: socialism
and neoliberalism.

Socialist ideas were already floating around the democratic West
in the early 1900s, but they gained much greater popularity after
the Great Depression, which was widely seen as a failure of
capitalism. One part of this shift entailed a greater role for the
government in regulating or owning business enterprises. The second
part involved a major expansion of social insurance programs.

Beginning in the late 1970s, there was a backlash against
excessive government intervention in the economy. This neoliberal
revolution involved privatization, deregulation, and cuts in
marginal tax rates, but it left most social insurance programs in
place.

Daniel Stedman Jones, an independent historian (and barrister)
in London, has written a balanced and informative study of
neoliberal thinkers such as F.A. Hayek and Milton Friedman,
exploring their impact on policy making, particularly during
Margaret Thatcher’s administration in the United Kingdom and Ronald
Reagan’s in the United States. Jones suggests a policy revolution
that began in the 1970s drew on 30 years of neoliberal research and
advocacy, partly financed by businessmen hostile to Franklin
Roosevelt’s New Deal policies. Although Jones is skeptical of the
more radical elements of neoliberalism, he is mostly respectful of
the major neoliberal figures, despite the fact that his own
politics are clearly left of center.

Jones traces the origins of neoliberalism to the mid-1940s,
specifically to the nearly simultaneous publication of Hayek’s
The Road to Serfdom (1944), Ludwig von Mises’
Bureaucracy (1944), and Karl Popper’s The Open Society
and Its Enemies (1945). The appearance of these highly
influential books was followed by the formation of the Mont Pelerin
Society, a group of American and European neoliberals who met
annually starting in 1947. Even within this group there were
important ideological differences, with Popper being much more
sympathetic to the democratic left than Mises. Early neoliberals
rejected complete laissez faire, which was widely seen as
discredited by the depression; they supported economic
interventions such as antitrust laws, the regulation of natural
monopolies, health and safety regulation, and government provision
of education and other social services.

Over time the center of the
neoliberal movement shifted from Europe to America, especially the
economics departments at the University of Chicago, where Milton
Friedman taught, and the University of Virginia, where James
Buchanan and Gordon Tullock developed “public choice” theory, which
aims to explain why government policies often end up serving
special interest groups. At the same time, the ideology drew closer
to laissez faire. Neoliberal economists were less likely to endorse
interventions such as antitrust and more likely to support a
radical program of deregulation.

Beginning in the late 1970s, neoliberal ideas began to have a
significant impact on policy in the U.S. and Britain. Under
President Jimmy Carter there was significant deregulation of
transportation, utilities, and banking, and capital gains taxes
were reduced. Deregulation continued in the 1980s under President
Reagan, who also slashed the top income tax rate from 70 percent to
28 percent. In Britain the Labour Party began to move away from
traditional Keynesian stimulus programs, as these policies were
widely blamed for the high rates of inflation during the 1970s.
Thatcher sped up that trend after taking office in 1979. Her Tory
government privatized state-owned firms and public housing,
deregulated the financial industry, weakened labor unions, and
sharply reduced the top income tax rate.

My reservations about Jones’ study start with the term
neoliberal, which is often intended as an insult when used by
people on the left. Jones places neoliberalism within the framework
of modern conservatism. I see neoliberalism as exactly what the
name suggests, a new form of liberalism. It might be viewed as
classical liberalism with a welfare state added on, or
mid-20th-century liberalism without government ownership of
industry and without regulation of prices and market access.

Jones is aware that the neoliberal revolution was often a
bipartisan affair. “Too often,” he writes, “the adoption of certain
key [neoliberal] policies by Labour or Democratic administrations
during the 1960s and 1970s is assumed by conservative commenters to
have been a sham, or by left or liberal commenters to be a source
of shame. These views miss important elements in the successes and
failures of the neoliberal political project.”

But in the end Jones accepts the standard left-wing complaint
that neoliberalism eventually turned into what the Nobel laureate
economist Joseph Stiglitz has called “market fundamentalism.” In
Jones’ words, neoliberalism became the “elevation of the market to
an almost theological status.”

There is a grain of truth in this charge, but Jones misses the
bigger picture for three reasons: He underestimates the extent to
which neoliberalism was built on impressive economic research, he
overstates the extent to which neoliberalism became associated with
modern conservatism, and he overstates the neoliberals’ opposition
to government. Most of the neoliberal critique was aimed at
specific statist policies, such as nationalization and regulation,
not at “big government” per se.

Consider Jones’ description of neoliberalism’s evolution from
the late 1940s to the ’70s: “The early neoliberals were marked by
their desire to move beyond both laissez-faire economics and the
New Deal. Later neoliberals, defined by the Chicago emphasis on
unregulated markets, were less ambiguous in their opposition to the
welfare state and to the need for government intervention in the
economy.”

In political practice, neoliberalism was not about abandoning
the welfare state. It was about deregulation, privatization, freer
trade, lower marginal tax rates, and keeping inflation under
control. Thatcher’s policies were viewed as a big neoliberal
success, despite the fact that government spending remained close
to 40 percent of GDP. There is far less regulation of investment,
trade, market access, and prices in developed countries today than
in the 1970s. Many state-owned enterprises have been sold to the
private sector, and inflation has been brought down to relatively
low levels. Virtually every developed country has sharply cut its
top income tax rate from the levels of the 1970s. Yet the welfare
state in those countries is roughly as large as it was four decades
ago.

Nor was opposition to the welfare state ever a big part of the
academic side of neoliberalism. I studied economics at the
University of Chicago between 1977 and 1980, when the Chicago
school had reached its peak of influence. There was a heavy focus
on the failures of Keynesian demand-side macroeconomics as well as
the often counterproductive effects of regulation. But if the
welfare state ever came up, it was generally brushed aside with the
comment that the optimal policy would probably be to just give
money to the poor.

Milton Friedman proposed a “negative income tax” that would have
replaced many welfare programs with direct cash payments. He also
advocated vouchers for education and health care, plus a
progressive consumption tax. Jones suggests that Friedman was
opposed to both the welfare state and progressive taxes, but that’s
a bit misleading. What Friedman opposed was paternalism and
inefficiency. At times Friedman indicated that his ideal society
was a minimal state, but his policy recommendations would have
given the government a substantial role in addressing issues such
as health care, education, and income inequality. Hayek too
supported a basic safety net.

A study by the libertarian political scientist Charles Murray in
the mid-1980s did point to the pernicious effect of welfare on
incentives, but the issue was not significantly addressed until the
mid-1990s, when the welfare system was modified—under a Democratic
president—to provide smaller benefits to the nonworking poor and
more subsidies to the working poor. This wasn’t a conservative plot
to cut spending. It was an example of modern liberalism being
transformed by academic research.

All the other major neoliberal initiatives in America were
essentially bipartisan, including free trade agreements, cuts in
capital gains taxes, the reduction of the top income tax rate, and
the deregulation of transportation, utilities, and banking. Because
big social programs such as Medicare and Social Security in America
and the National Health Service in the U.K. are highly popular,
criticism of the welfare state is often directed at relatively
modest efforts aimed at groups not likely to vote for the more
conservative party. Even as Mitt Romney complained about people
“who are dependent upon government, who believe that they are
victims, who believe the government has a responsibility to care
for them,” he campaigned vigorously against President Barack
Obama’s Medicare cuts.

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That's the impression I get. I listen to a lot of European
broadcasters, and the word "neoliberal" gets used as a sneer word
in much the same way "fascist" is used to shut down debate.
Basically, it seems to mean, "I don't like this economic
policy!"

Throwaway policy elements of neoliberalism were popular in a
handful of economies for about 15 minutes in the early 80's before
burning out. The entire premise of the book and article is absurd.
There was no "neoliberal revolution", unless you consider tiny
lapses into pre-intervention market behavior, swiftly followed by a
return to centralization and interventionism revolutionary.

Absolutely this, although the author's idea that 'The Shock
Doctrine' should even be mentioned as a serious work is laughable.
The fact of the matter is that economic policies that don't
directly relate to the 'gimme more free stuff' crowd will never
appeal to Europeans, and haven't appealed to Americans since the
New Deal, despite the minor returns from the most ludicrous of
interventionists policies.

I'll take the author's word that this book is much better than
Klein's ridiculous rant, but it's hard for me to imagine a study
that gets so much wrong, historically and factually, is worth my
time. Add to that the fact that the author of this "more balanced"
history of neo-liberalism uses the cheapest of fact-free lefty
insults ("your position is theological, not factual") and I think
I'll just skip this one.